Best Banks for a Mortgage

Skyrocketing rents and housing prices have home shoppers hungrier than ever to close the right deal. For the money-minded, nabbing a single family home in the coming year should be a priority. That said, most buyers need a mortgage loan to do so, along with a hefty down payment.

The home-buying process can be stressful, and the bank or lender you choose is a crucial step. In this post, we’ll take a look at the best banks for a mortgage, the current mortgage rates you’re likely to pay, and the different loan products that you have to choose from.

8 Best Banks for a Mortgage

Here are the best banks and lenders to help you secure a mortgage in 2022.

1. Rocket Mortgage

Rocket Mortgage, formerly known as Quicken Loans, is the largest online retail lender in the U.S. In addition to mortgages, the lender offers personal loans, auto loans, and more.

Mortgages are Rocket Mortgage’s bread and butter, and its mortgage products include conventional loans, VA loans, FHA loans, and jumbo loans.

If you’re comfortable with an online lender, Rocket Mortgage has a ton of resources to offer, including tips for first-time buyers, a mortgage affordability guide, and other useful information in its online learning center.

At the moment, a 30-year mortgage with a fixed rate starts with a 5.875% interest rate, though you’ll find a lower interest rate with the 15-year option at 5.375%.

To get started with Rocket, head to the website or download the mobile app, which boasts a 4.8-star rating (out of 5) in the App Store.

2. Pentagon Federal Credit Union

Pentagon Federal Credit Union, better known as PenFed, is among the biggest distributors of VA loans in the country. But it doesn’t stop there. The credit union also offers conventional loans with both fixed and adjustable rates, along with jumbo loans and FHA loans.

With a conventional loan from PedFed, you can secure up to 97% financing if you’re a first-time home-buyer. There are no lender fees included, and you can earn up to $2,500 in lender credits, depending on your total mortgage amount.

To find out the best mortgage rate with PenFed, all you have to do is fill out some basic information online about your personal finances. Fortunately, PenFed has a super easy-to-use rate calculator, and you can see your rate options for various types of loans and interest rates.

3. Ally Bank

Ally is the biggest online-only bank in the U.S., but it has a lot more to offer than its stellar high-yield savings account. While Ally is best-known as an online lender for its auto loans, it also comes with some excellent completely online mortgage options.

The bank offers both fixed and adjustable rate conventional mortgages, or jumbo loans of up to $4 million. You can get pre-approved for a loan in as little as three minutes online, and there are no application, origination, processing, or underwriting fees to worry about.

Ally claims that their mortgages close (on average) 10 days faster than with other lenders. This is partly due to the online nature of the platform, but Ally also offers full support from its team of home loan experts throughout the process.

When you’re ready to get started with Ally, just head to the site to apply. You’ll get your pre-approval letter in just a few minutes, and it won’t affect your credit score to find out your rate.

4. NBKC Bank

NBKC is an online-only bank based in Kansas City. In the years since it made the move to go full digital, the bank has become more well-known for its online banking products, and particularly its home loans.

With NBKC, the application is simple and streamlined, and you can complete it entirely online. It offers a variety of options for buying and refinancing, along with home equity loans. To get started, you can check out the free online rate calculator, which will give you an idea of what rate to expect.

Plus, you can count on solid customer service. While its online tools are definitely helpful, NBKC makes it a priority to connect you with a person in real-time when you need help.

5. SoFi

SoFi (short for Social Finance) is a fintech company and chartered bank that provides a wide variety of financial products. It is best-known for student loan offerings and online investment accounts, but SoFi also maintains a significant presence in the world of mortgage lending.

For home loans, SoFi offers 10, 15, 20, and 30-year fixed terms with as little as 3% down. It offers some seriously competitive rates, and you can count on one-on-one support from application to close. SoFi also partners with HomeStory, which can hook you up with a rebate up to $9,500 when you work with one of its approved realtors.

Plus, SoFi’s Lock and Look feature can secure your interest rate for up to 90 days while you shop around. SoFi is also committed to making sure you close on your house as expected. It even offers a $2,000 guarantee if its loan officers can’t help you get the deal done on time.

6. PNC Bank

PNC Bank is one of the largest financial institutions in the U.S. Its branch coverage area extends from the Mid-Atlantic to Texas, and it also comes with a top-tier online banking platform.

If you’re feeling overwhelmed just starting the process of looking for a mortgage, PNC can be a great place to start. Its online platform is extremely user-friendly and it walks you through every step of the process.

You can quickly calculate the affordability of a home and get a sense of your rates with some easy, basic information. From there, you can move on to your application with the assistance of a PNC home lending rep. Plus, if you prefer talking things out in person, PNC will help find a local loan officer to connect you with.

PNC offers fixed-rate mortgages with terms ranging from 10 to 30 years. Down payments are as low as 3%, and you can apply for a PNC grant that’ll cover up to $5,000 of your closing costs. PNC also offers Home Equity Loans and Home Equity Lines of Credit (HELOC) if you’re looking to use your home’s equity down the road.

7. Chase Bank

New York-based Chase Bank is the largest bank in the U.S., so it comes as no surprise that it’s also one of the biggest mortgage lenders.

Much like Chase’s bank account offerings, you can grab any type of mortgage you might be looking for. It offers both fixed and adjustable rates on conventional, and jumbo loans, plus VA and FHA options.

When you get ready to apply, Chase simplifies the upfront work with a quick pre-approval application and a handy online tool to help define your budget. It also provides a simplified breakdown of the pros and cons of each type of loan, so that you can easily figure out what makes sense for you.

8. Bank of America

Bank of America (BoA) is another supersized bank that you’ve probably heard of. With thousands of branches throughout the U.S., BoA commands a significant percentage of all American retail deposits.

When it comes to mortgages, BoA operates in a similar way as Chase, with a ton of different options to choose from. The bank is also known for rewarding its most loyal customers, so you might be in line for a discount if you have a pre-existing relationship.

While BoA is a fairly traditional bank, it’s also up with the times when it comes to online applications. You can quickly get pre-approval, and BoA also offers a real estate center to help you poke around for the perfect home. From there, it’s as simple as filling out an application and finding a good rate.

What is a Mortgage?

If you plan on becoming a homeowner, you’re probably familiar with the idea of a mortgage. While we’d all love to pay for a new house in cash, the vast majority of people need to finance the purchase. This is where a mortgage loan comes into play.

A mortgage is a type of loan that you can use to purchase a house, piece of land, or other real estate property. When you take out a mortgage, like any loan, you’re agreeing to pay your lender back over time. These terms are agreed upon upfront, and borrowers typically have a set monthly payment for the duration of their mortgage. A mortgage is a secured loan, and the property you’re purchasing serves as the collateral.

There are many different types of mortgages, and each one appeals to a different type of buyer. For example, some types of loans are ideal for those with a high credit score and disposable income, while others make it easier for those without as much savings.

Let’s take a look at some of the main types of mortgages.

Types of Mortgages

There are several different mortgage options to consider, and the one that’s right for you mainly depends on your personal finance situation. Factors like affordability are affected by interest rates and closing costs, and you always want to optimize your loan terms for your specific needs.

So, whether you’re buying for the first time or refinancing a current mortgage, here are the most popular options at your disposal.

Conventional Mortgage

A conventional loan is the most common type of mortgage, and it’s usually a solid choice for those with a good credit history and the ability to make a sizable down payment. To qualify for a conventional mortgage, you need a credit score of at least 620, and a minimum 3% down payment.

You can use a conventional mortgage for a primary home, secondary home, or investment property. Conventional loans are also known as conforming loans, meaning that they meet the requirements laid out by government institutions.

If you take out a conventional mortgage, you’re required to purchase private mortgage insurance (PMI), at least until you reach 20% equity in the property. So, while you can technically get a conventional loan with as little as 3% down, there are huge benefits to increasing your upfront payment.

Jumbo Mortgage

A jumbo loan is an option if you’re taking out a mortgage that exceeds the government limits. This makes a jumbo mortgage a non-conforming loan.

Jumbo loans are more common in high-value areas, such as major cities like New York, San Francisco, Miami, and Los Angeles (to name a few). Overall, they come with similar interest rates and terms to conventional loans. If you live in an area with super-high home values, a jumbo loan may very well be your only option — unless you’ve got a ton of cash laying around.

However, as you could expect, a bigger loan means more stringent requirements to get one. A down payment of at least 10% is usually required for a jumbo mortgage, along with a credit score of at least 700. You’ll also have to prove that you have sufficient cash and assets to justify the loan, plus a lower debt-to-income ratio. This qualification process is known as underwriting, a complex piece of any mortgage application process.

Government-Insured Mortgage

There are several government loan programs that aim to make it easier for people who do not qualify for a conventional loan. These loans are insured by the government and tend to feature more competitive rates than conventional loans.

Here’s a look at the three most common government-backed mortgage options.

Veterans Affairs (VA) Loans

VA loans are flexible mortgages with low-interest rates and are available to current or former US military members. VA loans don’t require a minimum down payment, and you don’t need a certain credit rating or mortgage insurance to qualify. In addition, there’s typically a cap on any closing costs, which the seller can contribute to.

Instead of the usual costs of a conventional loan, VA loans come with funding fees attached. This is expressed as a percentage of the total loan amount, and borrowers can pay it upfront or as part of their regular mortgage payment.

Federal Housing Authority (FHA) Loans

An FHA loan is one that’s backed by the Federal Housing Authority. These mortgages are similar to VA loans in terms of benefits but aren’t limited to a specific group like the military. Instead, FHA loans are designed to assist anyone who cannot afford a large down payment, or who might be hampered by their credit report.

FHA loans usually require a credit score of just 500, but you should keep in mind that the lower your score, the higher your down payment requirement. To qualify for the minimum 3.5% down payment, you’ll need a credit score of at least 580.

USDA Loans

The United States Department of Agriculture (USDA) also backs mortgages intended for middle-class and low-income homebuyers. These loans are specifically issued for properties in rural areas that are approved by the USDA.

USDA loans are extremely flexible when it comes to a down payment, but it’s important to keep in mind that they do come with some fees. Typically, USDA loans come with a 1% origination fee, which can be built into the financing, along with an annual fee.

Fixed-Rate Mortgage

If you’re familiar with different types of interest rates, such as those that come along with a credit card or car loan, then there’s a good chance you understand the difference between a fixed and adjustable rate. The same principles apply to a mortgage.

With a fixed rate, your interest rate stays the same for the entire length of your mortgage. Of course, this can be great if you lock in at a low rate but could cost you if the market takes a turn for the better a couple of years in.

Of course, you always have the option to refinance, but it’s a best practice to negotiate for the best rate out of the gate.

Adjustable-Rate Mortgage

An adjustable rate, on the other hand, moves with market trends. If federal interest rates go up, so will your mortgage rate. However, if rates drop, you won’t miss out on those savings.

A lot of the decision between a fixed and adjustable rate comes down to your own risk tolerance, along with the market status at the time of your closing.

How to Apply for a Mortgage

Once you narrow down your home loan options and identify your preferred lender, it’s time to fill out a mortgage application. You might be able to get preapproval for different mortgage programs, and many lenders offer a mortgage calculator so you can know your rate quotes ahead of time.

Before you start an online application process, be sure that you meet the minimum credit score requirements, and be prepared with all of the financial documents that you’ll need.

Many home-buyers will fill out applications with multiple providers to find the best rate. When you commit to a lender and their offer, that’s when the underwriting process begins. This can take weeks to complete, so don’t expect to close on your new home as soon as you get approval.

Now that you know what you’re looking for and what the mortgage process will be, let’s dive into some of the best mortgage lenders in operation today.

Frequently Asked Questions

What is the best bank to use to buy a house?

If there was a clear-cut answer here, we wouldn’t have gone to the trouble of making this list. The truth is that it’s a little different for everyone. Instead of trying to figure out the best overall lender, it’s important to focus on which institution is the best option for your specific situation.

Figure out what you can afford, where you want to buy, and what sort of mortgage you’re interested in. From there, it should be a lot easier to narrow it down.

Who is the top mortgage lender?

In 2021, Rocket Mortgage was the top mortgage provider in the US with more than $340 billion issued. Among traditional banks, both Chase and Bank of America were near the top.

Is it better to get a mortgage with a big bank?

Once again, it depends. There’s plenty to like about working with a big bank, including peace of mind, tons of support, and high-functioning online tools. However, it’s possible that you might run into an excess of lender fees and less personalized customer support, so it’s always worthwhile to check out several different types of lenders.

Find a Quality Mortgage Lender

Buying a house is an exciting and slightly scary experience. For first-time homebuyers, it’ll likely be the biggest purchase you’ve ever made, by a million miles. So it’s essential to work with a lender that makes it as painless as possible.

And remember, with a purchase as significant as a home, you should never be afraid to ask for help. Don’t expect to figure everything out on your own, and definitely plan to hire the best support team you can find.

Now that you know all about the best banks for a mortgage, you can approach the home-buying process with a little extra confidence. Happy house hunting!